The Venezuelan government is now focusing its action on trying to establish the bolivar as the reference currency for purchases in the country. According to several economists, this could be a risky bet in a country which has just emerged from hyperinflation and which still suffers from high levels of inflation. However, the introduction of a 3% tax targeting currency and crypto spending has some effects in this regard.
Venezuela seeks to strengthen its fiat currency
After experiencing de facto dollarization, which the country’s president called an “exit valve” from the economic crisis that Venezuela faced five years ago, the country is now looking to establish its fiat currency, the bolivar. , as an attractive choice for payments. A new tax called IGTF, which aims to tax transactions and payments made in dollars, foreign currencies and crypto at 3% in certain cases, seems intended to help achieve this goal.
However, now may not be the time to make such adjustments, now that Venezuela has just emerged from a period of hyperinflation which has also been combined with the devaluation of its fiat currency, which has had to be renamed twice. Asdrubal Oliveros, a national economist who runs Ecoanalitica, a consulting firm, said:
It’s a risky bet, at the wrong time, because the recovery is very weak and the economy is still suffering from chronic inflation, not hyperinflation, but chronic inflation. It is very high to restore confidence in the currency overnight.
Dedollarization in progress
However, the measure seems to have a real effect on the spending habits of Venezuelans. According to figures presented by the Banking Superintendency, the use of national fiat currency increased after the tax was introduced and started to be applied. The figures show that digital transactions in local currency increased by 21% and debit payments by 22%.
The use of the bolivar has steadily increased since 2021, when 70% of purchases were made in dollars or Colombian pesos. Ecoanalitica surveys now show that the bolivar and other payment methods outweigh the dollar, which is now only used in 44.7% of commercial transactions in the country. This is partly due to the intervention of the country’s central bank to stabilize the fiat currency, whose volatility has stabilized against the dollar this year.
What do you think of the dedollarization process that Venezuela is going through? Tell us in the comments section below.
Image credits: Shutterstock, Pixabay, Wiki Commons
Warning: This article is for informational purposes only. This is not a direct offer or the solicitation of an offer to buy or sell, or a recommendation or endorsement of any product, service or company. Bitcoin.com does not provide investment, tax, legal or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.